{"id":76849,"date":"2024-04-08T09:59:00","date_gmt":"2024-04-08T02:59:00","guid":{"rendered":"https:\/\/neu.edu.vn\/introducing-the-vietnam-annual-economic-review-2023-boosting-aggregate-demand-for-economic-growth-in-a-new-context\/"},"modified":"2024-04-08T09:59:00","modified_gmt":"2024-04-08T02:59:00","slug":"introducing-the-vietnam-annual-economic-review-2023-boosting-aggregate-demand-for-economic-growth-in-a-new-context","status":"publish","type":"post","link":"https:\/\/neu.edu.vn\/en\/introducing-the-vietnam-annual-economic-review-2023-boosting-aggregate-demand-for-economic-growth-in-a-new-context\/","title":{"rendered":"Introducing the Vietnam Annual Economic Review 2023: Boosting Aggregate Demand for Economic Growth in a New Context"},"content":{"rendered":"

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Back<\/strong>ground<\/strong><\/p>\n

In 2023, the global economy continued to face considerable instability: global inflation remained high, central banks continued to pursue tight monetary policy, many major economies experienced slower growth, and political factors such as the Russia-Ukraine war remained highly complex, while the Israel-Hamas conflict grew increasingly tense.<\/p>\n

Against this backdrop, Vietnam\u2019s economy also faced numerous challenges. Gross domestic product (GDP) grew by 5.05% in 2023 compared with 2022, exceeding only the growth rates of 2.87% and 2.56% recorded in 2020 and 2021, respectively, during the 2011-2023 period. In 2023, the industry and construction sector showed no positive signs of recovery, growing by only 3.74% year over year (low compared with average growth of 8.6% in 2015-2019). Within this sector, processing and manufacturing grew by 3.62% year over year, also the lowest annual growth rate in the 2011-2023 period. Inventories across processing and manufacturing increased by 19.8% compared with the same point a year earlier (when the corresponding increase was 13.9%). Meanwhile, the real estate market experienced numerous difficulties and challenges. Transaction volumes declined, and demand for purchases remained low as investor sentiment weakened and investors adopted a wait-and-see approach, leaving overall market liquidity without signs of recovery. Total transactions over the four quarters of 2023 reached approximately 18,600 units from projects in the primary market, equivalent to only 17% of the level in 2018, before the Covid-19 pandemic.<\/p>\n

Total realized investment across the economy at current prices increased by only 6.2% in 2023 compared with the previous year (versus 11.2% in 2022). Within state-sector investment, realized investment funded by the state budget in 2023 reached only 85.3% of the annual plan and increased by 21.2% year over year. Realized investment from the non-state sector grew by only 2.7%, far below the 8.9% increase in 2022. Similarly, realized foreign direct investment (FDI) in Vietnam in 2023 increased by only 5.4% (versus 13.9% in 2022). Meanwhile, spending momentum also tended to decline. For 2023 as a whole, total retail sales of goods and consumer service revenue increased by only 9.6% year over year (versus 20% in 2022), or 7.1% excluding price effects (versus 15.8% in 2022). Declining household incomes led to reduced consumer demand for goods. Data for 2023 show that final consumption increased by only 3.52% year over year (versus 7.09% in 2022). In tourism services, despite efforts to attract international visitors back to Vietnam, international arrivals in 2023 were estimated at 12.6 million, 3.4 times the previous year\u2019s figure but still only 70% of the level in 2019, before the Covid-19 pandemic.<\/p>\n

In international trade, financial issues in Europe and the United States, such as public debt and high interest rates, contributed to restraining the economy and reducing global aggregate demand, significantly affecting countries with export-led growth strategies such as Vietnam. For 2023 as a whole, export and import values both fell sharply year over year, declining by 4.4% and 8.9%, respectively, as demand decreased across Vietnam\u2019s major markets, including the United States, the Association of Southeast Asian Nations (ASEAN), the European Union (EU), and several East Asian countries. Export volume to the U.S. market recorded the steepest decline, at 11.6%, while import volume from South Korea fell by 15.5%, the largest decrease among major markets. This caused output of several of Vietnam\u2019s key industrial products to decline sharply compared with 2022.<\/p>\n

By the end of 2023, credit to the economy had grown by 13.5% (compared with 14.5% the previous year), against a credit growth target of 14%. Vietnam\u2019s economy is highly open, and business operations depend heavily on the international economy. Meanwhile, the global economy remained unstable, inflation was trending downward but remained high, and declining demand for trade and investment affected domestic enterprises\u2019 investment activities. Regarding access to capital, some customer groups, such as small and medium-sized enterprises (SMEs), needed loans but did not meet lending conditions, while others, such as real estate enterprises, faced obstacles related to legal procedures. Thus, amid widespread difficulties, domestic demand for investment, production and business activities, and consumption all declined, leading to a corresponding reduction in credit demand. Although the two-year economic recovery support package for 2022-2023 had expired, disbursements remained very low, failing to provide timely support for the difficulties enterprises faced.<\/p>\n

These figures indicate a sharp decline in aggregate demand in Vietnam\u2019s economy, as all three components\u2014investment, exports, and consumption\u2014weakened. Aggregate demand plays an important role in determining the level of economic activity and employment in an economy. Declining aggregate demand indicates a risk of recession, affecting overall economic growth and causing consequences such as falling industrial production, rising unemployment, and reduced household incomes and spending. Restoring aggregate demand was therefore an important task for Vietnam in 2023. This requires the Government and relevant ministries, commissions, and agencies to urgently take appropriate, timely measures to strengthen growth drivers on the aggregate demand side, thereby restoring aggregate demand and laying the groundwork for economic development in a new context.<\/p>\n

Accordingly, in addition to providing an overall assessment of the economy, the Vietnam Annual Economic Review 2023 will focus on growth drivers on the aggregate demand side, with the aim of restoring aggregate demand and economic growth. The study will provide an important basis for formulating key policy recommendations for economic growth in a new context.<\/p>\n

Research Objectives<\/strong><\/p>\n

The Vietnam Annual Economic Review 2023 by National Economics University (NEU) adopts the theme \u201cBoosting<\/strong> Aggregate Demand for Economic Growth in a New Context\u201d <\/strong>to provide a comprehensive review of Vietnam\u2019s economy in 2023 (achievements and remaining shortcomings, an assessment of causes, and an analysis of opportunities and challenges). The report also assesses the current state of aggregate demand and its components; achievements, remaining limitations, and their causes; and the contributions of aggregate demand components to economic growth. On that basis, it proposes directions and policy recommendations for economic management in 2024 and subsequent years, as well as policy recommendations to boost aggregate demand toward sustainable economic growth in a new context.<\/p>\n

Based on this overall aim, the report pursues the following specific objectives:<\/p>\n